Banner days are here again

Google is just one of the many companies that has noticed the lowly display ad is making an online comeback.

One of the first forms of digital marketing was the lowly banner ad. Splashed across the top of every Geocities and Angelfire site, these primitive ancestors of the slick online advertising campaigns that now drive revenue at the most visited websites were often gaudy, noisy and annoying. But the banner ad is back. Big time.

Display-related advertising, of which banner ads are the most prevalent kind, accounted for 37% of all online ad revenue in the United States during the first half of 2011, which translates into US$5.5 billion.

The reason: The large and heavy user base of prime online real estate such as Facebook, Yahoo and YouTube don’t want to be immersed in gaudy advertising. Indeed, one of every three display ads appears on a social-media site. Facebook, boasting 750 million users, accounted for about 15% of total display advertising revenue in the U.S. in the third quarter, according to data from ComScore Inc.

The web’s current advertising kingpin Google, meanwhile, accounts for about 10% of online display advertising in the U.S.

However, the Mountain View, Calif.-based company is looking to expand beyond the little blue links that appear next to its web-query responses. The company has reported that spending on the Google Display Network — which reaches about 90% of the global Internet audience by providing online ads for sites around the world — by the largest 1,000 advertisers has more than doubled over the past 12 months.

According to Eileen Naughton, Google’s managing director for display operations and strategy, the company’s plan to become a leader in display advertising stretches back to its decision to purchase YouTube for US$1.65-billion five years ago, which was followed up by the acquisition of ad network DoubleClick a year-and-a-half later.

“In that one-two punch we signalled Google’s intent to move well beyond search advertising and to bring technology improvements to bear on other forms of digital advertising, including rich media and display ads,” says Naughton, who was president of Time Inc. before joining Google.

Part of the revenue Google plans to grab will come from making the online advertising supply chain more efficient. Roughly 23 cents of every online ad dollar goes toward the various companies involved in getting an ad online. But Wall Street analysts have for years been wondering how Google planned to monetize YouTube.

Rather than develop a single advertising solution — such as AdWords for search — Google has created a number of different ad products for YouTube, including pre-roll ads, overlays and site takeovers. Google has realized that any future growth from its advertising business was going to come from display ads splashed across its own sites such as YouTube and the Google Display Network.

“Google saw that its search business was going to plateau, or grow slower, because it had reached a really big critical mass in most places around the world,” says Paula Gignac, president of the Interactive Advertising Bureau of Canada.

Across the advertising world, marketers are realizing that the shift to digital is inevitable as consumers spend more time online with their iPads and BlackBerrys than they do with their televisions.

The Interactive Advertising Bureau reports that online advertising grew by 23% during the first half of this year, well ahead of the 3% growth reported for all measured media. As spending on digital advertising kicks into high gear, companies will be looking for new ways to reach consumers, which means any ideas — even old ideas such as banner ads — will be given a test drive. The IAB notes that both search and display-related advertising have already registered impressive gains this year, growing 31% and 27%, respectively.

“This is a digital revolution… there’s no going back,” Google’s Naughton says. “The genie is out of this bottle.” ­